Is There a Housing Market Bubble?
Multiple offers, sky high prices, inventory nonexistent, and panic buying seems to suggest that a bubble is occurring in the housing market. That might not be the case.
If interest rates remain low and builders cannot catch up on providing inventory because of high lumber prices, there’s every reason to believe that the housing market will continue to be strong. This is not to say that one should not pay attention to prices when one is purchasing a home; it’s important.
The decision to buy a house in this type of market really comes down to whether or not this is a house you can live in long-term. You might be buying at a high price point, but there are benefits to owning a home including tax breaks to justify the purchase. However, you should set a budget and keep in mind what seems reasonable when making a purchase. Buying at crazy prices never makes sense.
What I’m most concerned about are those that are buying real estate based on speculation for investment purposes. This is similar to gambling and I think is a dangerous game to play when prices are this high. If interest rates increase that game will come to an end.
The real estate market is an indication of this weird economic time we are currently in post pandemic. “Buyer beware” is an important mantra that one should keep in mind when investing in assets in this type of environment.
As I like to say, we tend to be paranoid as we invest, and we will continue on that path. In today’s unprecedented environment that seems to be a reasonable path from my perspective. Perhaps a little conservative but in a high-risk environment where we are watching over your hard earned assets, we think that makes sense.
I just shake my head sometimes at this pandemic world that we’ve lived in. I’m grateful the light is beginning to emerge after a very dark time. And importantly to us, I hope you are doing well and staying safe.
As the world opens up again, you’ll see lots of changes in lots of different places, some of it will be wonderful. The best part is seeing your family once again and having get-togethers with those you love. That’s what matters in life and thankfully those moments are now here once again
A recent article on Vox outlined the current state of the market. A few excerpts are listed below.
“There’s a growing sense of unease. Renters at the lower end of the market have seen their rents rise in some places even as they’re more likely to be suffering the economic harms of the last year. Would-be homeowners are furious as they lose bidding war after bidding war, looking for someone to blame as they watch their peers land a home and lock in a low mortgage rate. And homeowners are riding high for now, exhaling sighs of relief that they made it into the exclusive club and eagerly watching their wealth skyrocket, worried about what might happen to change that.
The last crisis, when a housing bubble and risky behavior by Wall Street took the blame for the Great Recession, looms large in our collective memories. And with America’s unemployment numbers still not where we want them and the unequal economic recovery from the pandemic, the fear of another crash looms. It’s unsurprising, then, that the questions “are we in a housing bubble?” and “will the housing market crash?” saw a “tremendous increase” over the last 12 months, according to Google Search.”
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